Initial Public Offerings (IPOs)
An Initial Public Offering (“IPO”), the process whereby a public company offers for the first time securities to the general public, provides various benefits for capital financing. Nevertheless, a company should only consider undergoing an IPO if it has reached a certain level of progress, integrity and maturity and is furthermore desirous of expanding to greater levels.
The raising of capital and liquidity through the issue of shares is certainly one of the main characteristics of an IPO. By using proceeds from the share issue in a positive manner, listed companies ensure constant growth, through increased investment in research and development, capital expenditure, acquisitions or the payment of existing debt.
The Maltese Stock Exchange was awarded the Most Innovative Stock Exchange Award in 2014; it offers various admission to listing options, multi-currency options and a full-value chain of services from IPO up to the registration of securities in book-entry form within its depository. This, together with its proven track-record makes it an ideal gateway for international listings.
GTG has assisted a number of Maltese companies in their IPO process and continues to offer legal assistance not only on day-to-day matters but also in other processes such as the issue of bonus shares, increases in share capital
Benefits under Maltese Law
Malta provides various fiscal advantages to stimulate trade in quoted securities. In accordance with the provisions of the Income Tax Act, the transfer of securities in a company listed on the Malta Stock Exchange is exempt from capital gains tax.
Apart from capital financing, a successful IPO signifies a major landmark in the development of a particular company. The regulatory scrutiny that the listed company would have to face in order to safeguard the integrity of the market raises the company’s status considerably.
There are undoubtedly various other benefits that a company can achieve through an IPO strategy. These include better liquidity, the ability of the company to make acquisitions of other companies using the company’s securities and the retention and recruitment of employees through share option schemes.
Although an IPO is a challenging and demanding process, the final outcome and rewards for the right candidates outweigh any hardship faced.
A successful IPO involves a team of lawyers, auditors and financial advisors working in a synergetic manner with the sponsor and the Listing Authority supervising the whole pre-IPO process. At GTG, our dedicated professionals do their part by offering a wide range of services focused on the attainment of a flawless IPO, including:
Advice on the Best Corporate Structure
Most companies that are desirous of floating are still private companies. An IPO is only possible for public limited companies (Plc). The firm guides and advises clients in all the complex matters and issues that a change in status may entail.
A rigorous due diligence exercise assessing and verifying the legal and financial position of the issuer must be performed. This is often a tedious and long process but is also a sensitive step in the pre-IPO process and usually coincides with the drafting of the prospectus.
Drafting of Prospectus
The prospectus (also referred to as the Offering Memorandum) refers to the document required by the Listing Rules whereby the issuer presents information about the company, its shareholders, the financial situation and the prospects of the company. This must contain all the information required by the Listing Rules and the Listing Directive that places a prospective shareholder in a position to decide whether it is in his interest to acquire a holding in the particular company. A thorough and independent analysis of the company’s financial situation and future prospects is also undertaken in order to value the securities being offered.
Preparation of Corporate Structure
A company that decides to list its shares must introduce certain corporate structures, internal procedures and key personnel to successfully execute an IPO and thrive as a publicly held company. Accordingly, GTG can assist listed companies to introduce internal corporate structures such as audit committees and remuneration committees, guaranteeing that the company is managed in a diligent manner and that the interests of the general public who has chosen to invest in the company are safeguarded.
A company with shares listed on the stock exchange is bound by legal obligations introduced to safeguard the integrity of the market as well as the continuing obligations. As a result, a listed company must introduce procedures aimed at preventing and detecting market abuse. Furthermore, listed companies must ensure a proper flow of information to the market. It is crucial for companies to understand the requirements and implications that the decision to offer its securities to the general public entails in order to ascertain whether such companies are truly prepared to face the reality and obligations imposed on listed companies.